Inventory Cost Accounting Background

MANUFACTURED ITEM'S COST ELEMENTS

• The Cost of Raw Materials
• Cost of Labor employed
• All other cost = Overhead

Materials & Labor = Direct Cost

Overhead Items = Indirect Cost

OVerhead Cost Allocation

Method
Overhead Rate is $1000/hr Divided by Total products produced in an hour, 10,000 = $.10

Companies such as fitter that produce goods for inventory typically record cost manufacturing during a period using standard cost.

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